The ROI of marketing to your existing customers

October 18, 2018

Marketers have known a fact for decades: consumer loyalty is among any brand’s most valuable assets. The reason behind this is simple, a business will do much better if they sell to a few people many time over rather than a lot of people once. In the first scenario, marketing budgets are split between acquisition and retention, in the second, most budgets are focused on acquisition.

So let’s take a closer look at how and why you should reallocate some of your budget from acquisition to retention.

Investment

Marketing to your existing customers is cheap. You have a 5% to 20% chance to sell your products to first-time customers, whereas repeat customers bump that number up to 75%. The reasons behind this are simple enough:

Repeat customers have already bought from your store so if they have a good experience, they’ll be more than happy to come again no need to convince them all over again every time.

If they’re buying online, repeat customers have already broken the trust barrier, and they already entered their payment info, name, address, etc. The path to the sale is much faster!

If you have an ecommerce platform or you’ve been collecting your customers’ data (through feedback forms, contests…), you have their email and/or phone number, so you can deliver targeted personalized messages based on preferences, previous purchases etc.

These factors increase the performance of your communication, but we talked about cost. So what kind of actual expense are we talking about? Let’s break it down:

This is a tool (or small set of tools) that will store and help you manage your contacts and their history, as well as their interactions with your staff, brand, and products. It can be as cheap a an excel sheet, or tools with free plans such as Hubspot and Mailchimp. It can be as complex as an on-premise, multi-thousand dollars ERP such as SAP. In most cases, you can keep your monthly cost under $1,500 and still get huge value out of it by automating actions based on behaviors and interest.

A Marketer who knows their way around relationship marketing: $1,800-$3,000

It is very difficult to find fresh grads or juniors who can handle that kind of relational marketing. Typically, these marketers have some startup or software marketing experience in companies that work closely with their client portfolio.

Media budget: 150-Unlimited

Your media budget really depends on your priorities, you channels of communication, your target customers, etc. But allocating a media budget for existing customers only will allow you to maximise results and sales from this campaigns. You will end up running a campaign for broad audiences on potential customers, which will yield lower returns but bring in new potential customers, and another campaign targeting only your existing user, which should generate more direct sales and higher return on ad spend.

Return

You’re now spending substantial money to target your existing customers. So what do you get in return? First of all, sales. Do you need more? Alright.

More dataIn the age of digital, additional data is important. You can refine your customers’ preferences, better understand their budgets and amount spent per sale, you can get additional personal data such as phone number, address, family structure (if they have children, live with their parents…). All of that can serve to further your segmentation efforts and increase your return on investment over time.

LoyaltyIf you can deliver a good, delightful, or great experience to your customers every time they visit, you can ensure they’ll visit again. And as previously shown, a loyal customer is a profitable customer. You can even measure that, if you log sales data. The metric is called lifetime customer value (LTV): it’s the amount of money and number of purchases and the value of the interactions that a single customer will have over the lifetime of his relationship with your brand and products. The higher the LTV, the better it is for your business.

GrowthWith time, your processes will be clear and set. That’s when automation comes into play. Automating the processing of client data is no easy task, but the return is growth. More clients buy more through better-targeted, more personal interaction. That’s the power of automation, and it’s a practice that is just in its infancy (in Lebanon).

Note: all of that is true for online and offline businesses, but the returns are always greater if you have an ecommerce platform and gather data from offline customers.

It becomes clear that return and repeat customers are among the greatest sources of revenue for all companies, so if you’re convinced, we have everything you need to get started with a marketing plan dedicated to people who have already bought from you. Get in touch!